Spotify, the ad-supported music service that has swept Europe over the 12 months since launch, has plans for China. According to Shakil Khan (Spotify’s consiglieri) at a keynote speech given at London’s brand new NOAH conference, the company that already has 6 million users in the 6 European countries in which it currently operates has aggressive plans for the US first (Q1 2010) and then China and Germany in Q1/Q2 of next year.
The service is truly amazing – we have been lucky enough to have been allowed to roadtest Spotify over the last 6 months, and our download rate (mostly illegal) has reduced to a trickle. 6.4m tracks are available as long as you are online, and we have only failed to find what we are looking for a handful of times. The business model requires a certain number of people to upgrade to the premium service on top of getting big advertisers to stump up. For premium, you pay a fixed fee per month for all sorts of extras (no ads, the mobile apps etc.), but so far, this hasn’t been happening and Spotify is burning through VC cash. On the other hand, the service and the software is amazing, the have spent virtually nothing on PR and promotion, and 50,000 people are signing up to the service every day. They are in a great position to make this model work.
So why China? According to Khan,
China is also going to be a huge market for Spotify. [Khan knows it well – he launched and exited an internet advertising company in China years before the country appeared on most peoples’ radar] – the number one online activity there is music and guess what, “no-one buys music in China”.
But the facts remain – Spotify is struggling to get enough advertisers or premium customers in markets that have recent history of buying music in bulk. Payments to artists/ labels is small ($167 for 1,000,000 plays paid to Lady Gaga, apparently), but still significant (search for Spotify in Google and you will find lots and lots of arguments as to why the model is unviable). Payments to labels are outstripping revenues inbound by multiples. China already has the (clunky but free) Google Music service where you can download anything you want legitimately in addition to several other paid services (Wawawa, Aigo Music), Nokia Comes with Music is on its way next year, and over 99% of consumers still download illegally through the likes of Baidu.
Can ease of use win the day here in China. It looks like Spotify aims to find out soon!
Thanks to Techcrunch Euro for the report which you can read HERE.